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EXECUTIVE PERSPECTIVE: Al Gore – Carbon tax could help U.S. back away from fiscal cliff

Deborah Zabarenko

29 Nov 2012

By Deborah Zabarenko | 29 November 2012

(Reuters) – Nobel laureate and sustainable investment chief Al Gore has long favored a tax on carbon dioxide to curb global warming. Now, he said in a Reuters interview, a carbon tax could do something more: help pull the United States back from the fiscal cliff.

“I think we should put a price on carbon,” Gore said by telephone from Nashville, Tennessee. “For 30 years, I’ve advocated a tax on carbon dioxide that is offset by reductions in payroll taxes … Now as congressional leaders and the president face the the so-called fiscal cliff and the need to get a budget agreement, we could back away from the fiscal cliff at the same time we back away from the climate cliff.”

The consequences of going over the fiscal cliff — the combination of $600 billion in expiring tax cuts and spending reductions that is set to take effect at the end of 2012 if Congress fails to act — could be softened by action to stem climate change, Gore said.

“I think it does intersect with our economic challenge in a very positive way,” he said. “It can help us escape the slow growth that we’ve had and move toward sustainable growth.”

He pointed to California, which auctioned off 23.1 million carbon permits to businesses in the state in November, allowing them to emit the greenhouse gas next year. The auction price was $10.09 per tonne, less than analysts had predicted, but the sale of these permits still raised almost $300 million.

The permit sale is part of California’s cap-and-trade program, which officially begins January 1, 2013. Gore calls it a job creator, as well as a climate cleaner.

One problem with a carbon tax is the word “tax,” which is anathema to most Republicans and some Democrats. Many U.S. lawmakers also worry about how to apply such a tax fairly, so that poorer people who often drive greater distances for work don’t pay a disproportionate share.

Any carbon tax would likely be phased in, according to Charles Komanoff, director of the New York-based Carbon Tax Center. If carbon dioxide emissions were priced nationally at $10 a tonne to start, and rose by $10 each year, the revenue from this tax in its second year would offset the estimated annual $95 billion cost of the U.S. payroll tax holiday, a break that the fiscal cliff would eliminate, Komanoff said.

Gore, the former U.S. vice president, senator and congressman, and star of the Oscar-winning documentary “An Inconvenient Truth,” is also the co-founder and chairman of Generation Investment Management LLP, which champions long-term investing and what the firm’s manifesto calls sustainable capitalism.

“The disruptive threats now facing the planet are extraordinary: climate change, water scarcity, poverty, disease, growing income inequality, urbanization, massive economic volatility and more,” Gore and the firm’s co-founder David Blood wrote in the manifesto, published in the Wall Street Journal on December 14, 2011.

While businesses can’t take the place of governments, they wrote, “companies and investors will ultimately mobilize most of the capital needed to overcome the unprecedented challenges we now face.”

Gore said the storms, droughts and other extreme weather that hit the United States in 2012 turned public attention toward climate change, after years where it had slipped on the U.S. agenda.

The floods spawned by Hurricane Sandy in the mid-Atlantic, the drought that extended across 65 percent of the continental United States and the melting of Arctic ice to a record low are all signs that have become difficult to ignore, he said.

“The fact that weather patterns are being disrupted, that storms are getting stronger, these are all consequences that people see and feel with their own senses, and of course they’re perfectly consistent with what the scientific view has been,” Gore said. “At some point reality does have a way of intruding, and it is now commanding our attention.”

This offers an opportunity to President Barack Obama to act to limit emissions of carbon dioxide and other greenhouse gases, according to Gore.

“I hope he will,” Gore said of Obama. “I think he understands why our country and the world desperately need the leadership necessary to solve this crisis. And … yes, I do think that these extreme weather events have caused a lot of people to look more closely at what the scientists have long been warning us about.”

Climate scientists, including those who contributed to reports of the United Nations’ Intergovernmental Panel on Climate Change, have overwhelmingly linked human activities that emit carbon dioxide with a changing climate.

That message was underlined on Wednesday, when scientific reports about extreme weather put pressure on U.N. climate talks in Doha, Qatar, that are aimed at cutting climate-warming emissions.

Still, Gore sees a turning point, in favor of environmental sustainability.

As evidence, he said investments in renewable energy worldwide exceeded investments in fossil fuels in 2010, while developing countries are now installing more renewable energy systems than advanced ones and the cost of solar and wind power are decreasing.

“I think we are at a turning point, but that phrase implies a sharper transition than what is actually under way. The old metaphor of the ocean liner changing course miles after the rudder is changed, that’s the kind of turning point that we’re at right now.”


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